ESNT reported for the 2nd qtr last week.

Here are updated numbers for ESNT through 2nd qtr 2016:

```
Qtr 1st 2nd 3rd 4th
Earnings
2013 .22
2014 .18 .23 .29 .33
2015 .38 .41 .44 .48
2016 .52 .57
YoY Earnings Growth
2014 50%
2015 111% 78% 52% 45%
2016 37% 39%
Current 1YPEG = 0.26
Revenue
2013 42
2014 48 54 65 73
2015 80 84 92 97
2016 103 108
YoY Revenue Growth
2014 74%
2015 67% 56% 42% 33%
2016 29% 29%
Combined Ratio (percent)
2013 73.8 58.7 54.1 57.0
2014 54.4 48.9 42.9 42.3
2015 39.3 37.6 38.4 37.8
2016 37.2 34.1
```

So earnings and revenue continue to grow for 2016 2nd qtr, and Combined ratio is *still* dropping and is now 34.1 %. 1YPEG is at .30 for share price of $26.00 – very nice.

These articles explain the metrics I am calculating, and can be used to value insurance companies in general:

http://www.investopedia.com/articles/investing/082813/how-va…

http://seekingalpha.com/article/3280525-how-to-find-a-great-…

Here are updated metrics.

**Metric 1: Price to Book Tangible Book Value**

Rule of thumb is P/B should be less than 2.0. At a share price of $26, ESNT has P/B of 1.92 based on 2016 2nd qtr numbers. Not over 2, so OK but not a screaming buy signal, either. However, P/B is a bit like P/E so growth can justify a higher P/B. ESNT is growing at a very healthy rate, so a P/B of almost 2 is fine, I think.

**Metric 2: Premium Growth**

YoY premium growth was 46% for 2015, 25% for 1st qtr 2016, and 29% for 2nd qtr. Starting to move back up after a small decline last quarter, and very healthy.

**Metric 3: Net Income Growth**

YoY net income growth was 78% for 2015 and 38% for 1st qtr 2016, and 41% for 2nd qtr. Another improvement over the 1st qtr.

**Metric 4: Combined Ratio**

The lower the better for this metric that measures how well an insurance company turns sold premiums into profit. For all of 2015, the combined ratio was 38.3% and reduced to 37.2% for 1st qtr 2016. Still dropping in 2nd qtr to 34.1%. This is so good it almost seems ridiculous.

**Metric 5: Float Calculations**

Float for 2015 was $219 mil and they had 20 mil return on investment for 9.1% and 1st qtr 2016 float was up to 228 mill with return of 2.7% for qtr. 2nd qtr came in at 2.8% on $237 mil - still ticking up and still juicy. (1 – combined ratio) + return on float came in at 76.6% for prior 4 qtrs. Yowsir. Finally taking the last step suggested in the Rokke article, and dividing by P/B gives 39.9% based on 2nd qtr numbers. Awesome.

**Metric 6: Potential Return on Float: Equities / (Fixed Income + Cash)**

For ESNT, this ratio is 22.9 for 2nd qtr 2016. Still *very* aggressive level which is OK as long as they are not required to pay out on a lot of claims, which is unlikely, I think.

**Metric 7: Return on Equity**

ESNT ROE was at 14.1% for 2015 and updated for the 2nd quarter is 14.9% for the prior 4 quarters. Since an ROE in the mid teens is considered ideal for a well-run insurance company, ESNT passes this metric.

**Summary**

ESNT is humming along quite nicely, and the share price has moved up to reflect that performance. As recently as late June, shares were trading around $20 so at $26 there has been a nice 30% bump. Nevertheless, I think that starting a position at these prices is reasonable considering the steady growth. Since I already have a mid-size position, I will be adding on those days where the overall market pushes the price down.

DT